Two new OECD reports provide wide-ranging evidence of how reforming subsidies and tax breaks for fossil fuels and rationalising fuel taxes can help countries boost finances and meet green objectives.

Taxing Energy Use provides the first systematic, comparative analysis of the structure and level of energy taxes in the 34 OECD member countries. It sets out how tax rates vary between different types of fuel and different uses of fuel for each country. The information is also summarised in graphical form.

The report calculates what statutory tax rates on these diverse fuels imply in terms of taxation per unit of energy and per unit of carbon dioxide (CO2) emissions. It shows the wide variations in these effective tax rates across countries, and details how rates also vary widely within countries between different types of fuel (diesel, natural gas, coal, etc.), even when they are used for similar purposes. For example:

•On average, the effective tax rate in terms of carbon emissions on diesel for road use is 37% lower than the comparable rate on gasoline; the rate in terms of energy content is 32% lower.

•In heating and industrial uses, the average effective tax rate in carbon terms on oil products is EUR24 per tonne of CO2, compared with EUR13 per tonne for natural gas; the average rate on coal is only EUR5 per tonne, despite its significant negative environmental impacts.

•Fuel used in agriculture, fishing and forestry is often exempt from tax.

This wide range of tax rates - when measured in terms of carbon emissions - results in wide differences in the tax disincentives to emit.Since CO2 has broadly the same impact on atmospheric greenhouse gas concentrations (and thus climate change) however and wherever it is emitted, these differences underline the fragmentation in current international efforts to mitigate climate change.

"Variations in effective tax rates on energy use, and the low levels of taxation on fuels with significant environmental impacts, suggest important opportunities for countries to reform their energy tax systems and achieve environmental goals more cost-effectively," said Pascal Saint-Amans, Director of the OECD's Centre for Tax Policy and Administration. "Greater use of environmentally-related taxes could also be an economically efficient means of raising revenues to improve public finances at a time of fiscal crisis.”

For more information, journalists should contact Pascal Saint-Amans, Director of the OECD’s Centre for Tax Policy and Administration (CTPA) at tel.: (+33-1) 45 24 91 08.